Six North Jersey towns press for refund of treatment plant reserve funds

By EVONNE COUTROS

Staff Writer |

The Record

Six towns believe they are owed a share of millions of dollars held for decades as protection against their defaulting on loans, but not needed now that bonds have been paid off or soon will be, officials say. It’s a view that isn’t shared by the agency holding the money and isn’t planning on issuing refunds.

The towns – Waldwick, Allendale, Ho-Ho-Kus, Midland Park, Ramsey and Wyckoff – entered into an agreement to fund the sewage treatment plant in Waldwick and to pay off bonds that financed its construction 48 years ago.

The issuance of an original $22 million bond required Northwest Bergen County Utilities Authority to establish a reserve fund to cover the highest annual payment on the bonds as insurance against the towns defaulting on their debt.

“When the Authority went out to bond, they were required to put money in a reserve fund,” said Waldwick Borough Administrator Gary Kratz. “The reserve fund was to be either initially funded or ultimately funded by the six towns.”

With the bonds either already matured or maturing in the next few years, Kratz said the towns want to determine how much money is in the reserve fund and if they should have a rebate or credit coming to them.

There could be $6 million to $8 million in the utility’s reserves that should be distributed to the six towns that entered into the original agreement, said Kratz.

Michael Kasparian, vice chairman of the Authority disputes Kratz’s estimate of what’s in the reserve fund: “None of our financial experts have ever produced a number that comes close to $8 million.”

Furthermore, Kasparian said the Authority’s officials have been told by its attorneys that the only way to return the money to the towns is through rate stabilization.

“We have been told there is no legal basis for the Authority to write checks.” Kasparian said.

Kratz said the six towns have hired a bond attorney, who will try to determine what each town may be owed.

Since the original 1965 agreement, Mahwah, Saddle River, Upper Saddle River, and a section of Ridgewood, also are served by the Authority. A $4.1 million sewer line installation project is currently under way along Franklin Avenue in Franklin Lakes.

“I assume (the reserve) has already been established at the time the Authority was established in 1965,” Kratz said. “Presumably this reserve was funded by the original six towns. Where this all comes into play is on January 15 of this year, the last payment was made on the first bond issue and that bond issue was $22 million.

“The reserve fund was around $3 million for that issue. So now that reserve which was pledged against the highest year’s principal and interest in case the authority defaulted is no longer needed.”

The Authority has told the towns that the money will be used to offset some of the rates that are in the 2013 budget and purchase equipment, with the balance put into a rate stabilization fund to offset future year’s increases, Kratz said.

Not so fast, say the six towns.

“The problem that Waldwick and the other towns have is if we in fact are the ones that funded that reserve, then we think that we could solely benefit from those proceeds and potentially not other towns which may or may not have put money into this,” Kratz said.

“There are additional bonds that are coming due in the next couple of years, which likewise have reserve funds and these will total somewhere between $4 million and $8 million,” Kratz said.

The towns want to be sure they receive credit “for what they’ve paid into it,” he said.

“We’d prefer to have the use of the money that we paid rather than the Authority determining,” Kratz said. “Our position is the six towns should receive the credit that they deserve for this. That we should not benefit through future purchases or future offsets to increases … we should determine how that money gets used.”

Attorney Steve Rogut, who will be paid $9,000 — $1,500 by each of the six towns — will help determine how the Authority was originally funded, the language that determines how the reserve funds would be used, and whether the money can be returned through rebates to the towns.

Midland Park Mayor Patrick “Bud” O’Hagan credits the borough of Waldwick for staying on top what the original agreement may say.

“Most of us would not be aware of what’s going on and we give thanks and credit to Waldwick,” O’Hagan said. “Gary Kratz took charge.”

Six North Jersey towns press for refund of treatment plant reserve funds

By EVONNE COUTROS

Staff Writer |

The Record

Six towns believe they are owed a share of millions of dollars held for decades as protection against their defaulting on loans, but not needed now that bonds have been paid off or soon will be, officials say. It’s a view that isn’t shared by the agency holding the money and isn’t planning on issuing refunds.

The towns – Waldwick, Allendale, Ho-Ho-Kus, Midland Park, Ramsey and Wyckoff – entered into an agreement to fund the sewage treatment plant in Waldwick and to pay off bonds that financed its construction 48 years ago.

The issuance of an original $22 million bond required Northwest Bergen County Utilities Authority to establish a reserve fund to cover the highest annual payment on the bonds as insurance against the towns defaulting on their debt.

“When the Authority went out to bond, they were required to put money in a reserve fund,” said Waldwick Borough Administrator Gary Kratz. “The reserve fund was to be either initially funded or ultimately funded by the six towns.”

With the bonds either already matured or maturing in the next few years, Kratz said the towns want to determine how much money is in the reserve fund and if they should have a rebate or credit coming to them.

There could be $6 million to $8 million in the utility’s reserves that should be distributed to the six towns that entered into the original agreement, said Kratz.

Michael Kasparian, vice chairman of the Authority disputes Kratz’s estimate of what’s in the reserve fund: “None of our financial experts have ever produced a number that comes close to $8 million.”

Furthermore, Kasparian said the Authority’s officials have been told by its attorneys that the only way to return the money to the towns is through rate stabilization.

“We have been told there is no legal basis for the Authority to write checks.” Kasparian said.

Kratz said the six towns have hired a bond attorney, who will try to determine what each town may be owed.

Since the original 1965 agreement, Mahwah, Saddle River, Upper Saddle River, and a section of Ridgewood, also are served by the Authority. A $4.1 million sewer line installation project is currently under way along Franklin Avenue in Franklin Lakes.

“I assume (the reserve) has already been established at the time the Authority was established in 1965,” Kratz said. “Presumably this reserve was funded by the original six towns. Where this all comes into play is on January 15 of this year, the last payment was made on the first bond issue and that bond issue was $22 million.

“The reserve fund was around $3 million for that issue. So now that reserve which was pledged against the highest year’s principal and interest in case the authority defaulted is no longer needed.”

The Authority has told the towns that the money will be used to offset some of the rates that are in the 2013 budget and purchase equipment, with the balance put into a rate stabilization fund to offset future year’s increases, Kratz said.

Not so fast, say the six towns.

“The problem that Waldwick and the other towns have is if we in fact are the ones that funded that reserve, then we think that we could solely benefit from those proceeds and potentially not other towns which may or may not have put money into this,” Kratz said.

“There are additional bonds that are coming due in the next couple of years, which likewise have reserve funds and these will total somewhere between $4 million and $8 million,” Kratz said.

The towns want to be sure they receive credit “for what they’ve paid into it,” he said.

“We’d prefer to have the use of the money that we paid rather than the Authority determining,” Kratz said. “Our position is the six towns should receive the credit that they deserve for this. That we should not benefit through future purchases or future offsets to increases … we should determine how that money gets used.”

Attorney Steve Rogut, who will be paid $9,000 — $1,500 by each of the six towns — will help determine how the Authority was originally funded, the language that determines how the reserve funds would be used, and whether the money can be returned through rebates to the towns.

Midland Park Mayor Patrick “Bud” O’Hagan credits the borough of Waldwick for staying on top what the original agreement may say.

“Most of us would not be aware of what’s going on and we give thanks and credit to Waldwick,” O’Hagan said. “Gary Kratz took charge.”